There is sometimes some confusion about different types of loans and one area can be what payday loans can be used for. It is worth understanding more about them and then you will be able to decide whether they might be the right choice for you if you are in the situation where you are considering one.
Are there restrictions on what a Payday loan is for?
There are some loans where the money borrowed has to be used for specific purposes. This can include things like student loans and mortgages where you are expected to spend the money on course fees or a home. However, there are also loans where there is no specified purpose. A payday loan is like this in that the money does not have to pay for something specific and you will not even be asked what you are spending the money on. As with all loans, it is wise to think carefully about what you are spending the loan on and whether you feel it is worth it. It can be really wise to calculate how much the loan will cost you and then decide whether you feel that the item you are buying is worth this. Remember that the costs of the loan are effectively costs of you having that item and you have to decide whether you would have bought that item had it had a price tag of that much money. Many people would feel happy with that but it is good to check.
How much can be borrowed?
How much you can borrow with this sort of loan will partly depend on the lender. However, you will often find that the amount available tends to be hundreds of pounds and normally not more than a thousand. This means that they are really only good for cheaper purchases. It will ultimately be down to the lender as to how much they will let you borrow. They will normally lend small amounts of money to first time borrowers and if they can prove that they are able to repay the loan, then they are likely to lend them larger amounts. They tend to use this approach rather than using a credit record as guide, which is what mainstream lenders tend to do. This means that if you do have a poor credit record, you will be able to borrow money from them even if you are not able to do so using other lenders.
How do repayments work?
It is wise to understand how repayments of a payday loan work as it may influence your decision as to whether they are the right loan for your specific purchase. Payday loans were set up to help people manage until they next got paid. This means that they will only lend money for a short amount of time. You will given the money and expected to repay it plus interest when you are next paid. This can be really handy as the loan does not last long so you are not in debt for long. However, it does mean that you have a lot of money to repay at once which might be hard for some people to afford. If you were hoping to borrow money for a longer period of time, then you might find that there are loans which suit you better such as an instalment loan or guarantor loan.
So, although there are no official restrictions on what you can buy with a payday loan, you may find that you are restricted due to the amount that you can borrow and the way that the loans work. They can suit some people really well but it will depend on exactly what you need to money for, how much you can afford to repay and much the item you are buying with it costs, as to whether it will be the right loan for you. The fact that payday loans are often given to those with a poor credit record can be in your advantage though and may open up your borrowing options. It is wise to look into all the different types of loan so that you are aware of what they can offer you. You will then be in a position to work out which will fit your criteria the best. Then you will be able to compare the lenders that provide that types of loan and you will be able to decide which of those looks like it will be able to provide you with the best value for money. It will take some time but if you borrow money regularly it will be well worth it as you will be able to use the knowledge over and over again. It will also help you in the short term as you will find a loan that suits your needs well and hopefully you will not pay more than necessary for it either.